Boone Pickens ETF; Russian ruse comes to London

USA

Tracking the price of oil with equity

ETF Series Solutions, a US Bancorp-backed trust, and TriLine Index Solutions, a financial adviser associated with former hedge fund BP Capital, are listing a new ETF that uses equity to track the oil price: the NYSE Pickens Oil Response ETF (BOON).

BOON – which bears the name of BP Capital’s founder, T. Boone Pickens – will track an index of “energy intensive” companies whose performance “has consistently demonstrated a high, positive correlation to changes in the price of [Brent Crude futures],” the prospectus says.

Building the index begins with taking the 1,000 largest US-listed companies. Each company then “undergoes a correlation analysis of its total returns to the price return of Brent Crude,” the prospectus says. Only companies whose positive correlation is in the top 40% are eligible for inclusion in the Index.

Companies that make the cut are then “screened against a list of industries whose cash flows are fundamentally connected to energy as a producer or consumer,” it says. Only companies that are most energy intensive are chosen. The index is equally weighted and as of December had 81 companies.

Analysis – is this superior to an ETC or sector ETF?

BOON’s advisor will have to convince investors that this product is superior two approaches: Brent ETCs and sector ETFs.

Investors wanting Brent crude exposure often go for ETCs, which hold Brent futures physically and track Brent directly. Brent ETCs are the best way to get direct exposure to Brent crude. An edge BOON may have over ETCs is that many investors worry that holding futures contracts can come with contango. By using equity BOON gets around contango, and equity is often investors preferred asset anyway.

Convincing investors of BOON’s superiority to sector ETFs might be harder. Energy companies tend to correlate with energy prices. And if investors are interested in energy, why not use a liquid and low-cost energy sector ETF? There are arguments for why tracking Brent is preferable to tracking the wider energy ecosphere. But these may have to be spelled out.

Switzerland

Franklin Templeton cross-listings

FT is cross-listing its LibertyQ branded smart beta ETFs into Switzerland. They are:

Franklin LibertyQ Global Equity SRI UCITS ETF (FLXG)

Franklin LibertyQ U.S. Equity UCITS ETF (FLXU)

Franklin LibertyQ Global Dividend UCITS ETF (FLXX)

Franklin LibertyQ European Dividend UCITS ETF (FLXD)

Franklin LibertyQ Emerging Markets UCITS ETF (FLXE)

Germany

Deutsche Bank lists “yield plus” corporate bond ETF

Deutsche Bank is listing a new ETF that targets corporate bonds that boosts yield by including junk bonds. The Xtrackers iBoxx USD Corporate Bond Yield Plus UCITS ETF (XYLD) will physical track the Markit iBoxx USD Corporates 1-20 Index, which includes bonds rated from BB- to AAA. From what information is available, XYLD seems similar to the iBoxx EUR Corporate Bond Yield Plus UCITS ETF 1D, which has plundered almost $300m in assets. The major difference appears to be that XYLD goes for USD denominated bonds.

London

A Russian ruse

Fuchs Asset Management, an ETF newcomer from Luxembourg, is listing two new funds on the London Stock Exchange, one of which comes with a great ticker.

ITI Funds RTS Equity UCITS ETF SICA (RUSE)

ITI Funds Russia-Focused USD Eurobond UCITS ETF SICAV (RUSB)

RUSE will track RTS index, which tracks the performance of Russia’s biggest and oldest companies. This will be the first ETF on the LSE to offer investors exposure to this index.